Should I lock my rate?
Should I Lock My Rate?
Buying a home? You’re probably wondering, should I lock my rate? It’s a common question—and a smart one! Mortgage rates can change faster than your favorite streaming show’s plot twists. Locking your rate can protect you from surprises. But when is the right time to hit the lock button? Let’s break it down.
What is a Rate Lock?
A rate lock is like a promise from your lender to keep your interest rate steady until closing day. Whether rates climb or drop, your rate stays the same. This safeguard can be a lifesaver, especially when the market is unpredictable.
How Does a Rate Lock Work?
When you lock a rate, you’re essentially saying, “I’ll take this rate, thank you very much.” Lenders typically offer locks for 30, 45, or 60 days, depending on your closing timeline. If your loan doesn’t close in time, you might need to extend the lock, which could cost extra.
Why Timing Matters for Rate Locks
Timing is everything. Mortgage rates respond to the economy’s ups and downs like a roller coaster. Locking in at the right moment can save you thousands.
Economic Factors That Influence Rates
The Federal Reserve plays a big role here. When they hike rates, mortgage rates often follow. Inflation, job reports, and even global events can push rates higher or lower.
Personal Factors to Consider
Are you weeks away from closing? Or are you still house-hunting? If your timeline is tight, locking in now might be the smart move.
Pros of Locking Your Rate
Locking your rate can offer:
- Peace of Mind: No need to stress over rate changes.
- Protection from Increases: Rates rise? No problem—you’re covered.
When Locking is a Good Idea
If rates are climbing, locking protects your wallet. Plus, if you’re close to closing, it’s worth locking to avoid any last-minute surprises.
Cons of Locking Your Rate
Of course, it’s not all sunshine and rainbows.
- Missed Opportunities: If rates drop after locking, you’re stuck.
- Extension Fees: Need more time? You’ll likely pay for it.
Alternatives to Locking Your Rate
Some lenders offer float-down options, letting you snag a lower rate if the market dips. Or, you could gamble with a floating rate—though that’s not for the faint of heart.
Strategies for Deciding When to Lock
Not sure when to lock? Lean on your mortgage advisor. They live and breathe rate trends.
Tools to Predict Rates
Check out online calculators and follow economic forecasts. While no tool is perfect, they can give you an idea of where rates might head.
How New Way Mortgage Can Help
At New Way Mortgage, we’re all about making your journey smooth. Whether you want to lock your rate or explore options, we’ve got you covered. Talk or text us at 916-465-6639, email hello@newwaymortgage.com, or schedule an appointment HERE.
Don’t forget to subscribe to our YouTube channel for more tips at www.newwayhome.com.
Conclusion
So, should you lock your rate? It depends. If you crave stability and the market’s looking unpredictable, a lock can save you stress and cash. But every borrower’s situation is unique, and timing is key.
Ready to dive in? Get preapproved HERE and let’s figure it out together.
FAQs
1. What happens if I lock my rate and rates drop?
Some lenders offer float-down options, but ask about the specifics upfront.
2. Can I extend a rate lock?
Yes, but it may come with a fee depending on your lender.
3. Are there fees for a rate lock?
Many lenders include rate locks for free, but extensions can cost extra.
4. How long should I lock my rate for?
It depends on your closing timeline—ask your lender for advice.
5. What if I don’t lock my rate?
Your rate will “float,” meaning it could rise or fall before closing.
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